Let’s face it, estate planning terms can be confusing, particularly since different estate planning attorneys use different terms that can mean the exact same thing. Take "Living Trust" and “Revocable Trust” and "Revocable Living Trust" – all three of these terms can be used to describe the exact same thing – a trust that is created while you are alive and kicking and which you can alter, change, amend or completely revoke while you are still alive and kicking.
So What is a Revocable Living Trust?
More specifically, a Revocable Living Trust is a legal document that is created by an individual, called the Grantor, Settlor, Trustor or Trustmaker, to hold and own the Trustmaker’s assets, which are in turn invested and spent for the benefit of the Trustmaker as the beneficiary by a fiduciary called a Trustee. In most cases the Trustmaker of the trust will also be the Trustee, although some wealthy individuals may choose to have an institution manage their trust property.
Living Trust vs. Revocable Trust vs. Revocable Living Trust
So why are there so many different terms to describe the exact same thing? Because, as the saying goes, “To each his (or her) own.” Some estate planning attorneys, including me, use the term "Living Trust" when naming a client's Revocable Living Trust agreement: "Jane Doe Living Trust dated February 29, 2012."
Why do I like to name my clients’ trusts “Living Trusts”? Mainly because this term is shorter than “Revocable Trust” or "Revocable Living Trust" or "Declaration of Trust" and is easier to understand than "Inter Vivos Trust" (“inter vivos” means “between the living” in Latin).
Living Trusts, Irrevocable Trusts and Testamentary Trusts
With all of that said, you should be aware that the term "Living Trust" can also be used to describe an "Irrevocable Trust" that is created while you are alive and kicking, therefore making it an "Irrevocable Living Trust." This is in contrast to a "Testamentary Trust," which is a trust that goes into effect after the death of the person who has created the trust. But to date I have never come across an Irrevocable Trust that has been named the “Jane Doe Irrevocable Living Trust” – but that’s not to say that somewhere, some place, there is a trust named the Jane Doe Irrevocable Living Trust. Usually Irrevocable Trusts are named just that, the “Jane Doe Irrevocable Trust,” and sometimes the words “Life Insurance” are thrown in when that type of trust is being created – the “Jane Doe Irrevocable Life Insurance Trust.”
What’s in a Name?
Maybe all of this has confused you instead of helped you to understand the difference between revocable trusts, irrevocable trusts, living trusts and testamentary trusts. If you're confused, don't be. A trust can really be named anything, but most estate planning attorneys stick to the same terms out of habit, which is usually based on what they were taught by a more senior attorney when they were starting out in the estate planning field.
It is far more important to remember that regardless of what a trust is named, it's the terms and provisions contained in the actual written trust agreement that dictate how the trust is to be administered and disposed of during each beneficiary’s lifetime. The name of the trust is just how it is referred to and usually has no legal meaning or significance whatsoever.
Also keep in mind that if you ask for a revocable trust but instead get an irrevocable trust, then this may very well present a problem in the future since a revocable trust can be changed at anytime but an irrevocable trust can't be changed or can only be changed after jumping through various legal hoops.